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Fengzhen Min v. Republic of Korea (ICSID)

Why it matters

This case is significant as it is one of the first known ICSID awards involving a Chinese investor against Korea. The tribunal upheld Korea's defense that the investment was illegal, rejecting a claim initially valued at approximately KRW 2 trillion (USD 1.5 billion). It reinforces the principle that investments must comply with host state law to enjoy treaty protection, and sets a precedent for future investor-state disputes in the region.

Summary

Fengzhen Min, a Chinese national, initiated ICSID arbitration against the Republic of Korea under the China-Korea Bilateral Investment Treaty (BIT). Min claimed that Korea had expropriated his investment in a Korean company without compensation, violating the BIT. The claim initially sought approximately KRW 2 trillion (about USD 1.5 billion), later reduced to KRW 264.1 billion (about USD 200 million). Korea argued that Min's investment was illegal under Korean law, specifically that it involved fraudulent activities and violations of foreign exchange regulations. The tribunal agreed with Korea, finding that the investment was not made in accordance with Korean law and therefore did not qualify as a protected investment under the BIT. Consequently, the tribunal dismissed all of Min's claims and ordered Min to pay Korea's legal fees and arbitration costs totaling approximately KRW 4.9126 billion (about USD 3.6 million), plus interest. The award was rendered on May 30, 2024, and the Korean Ministry of Justice announced the victory on May 31, 2024.

The detail

Parties: Fengzhen Min v. Republic of Korea

Case number: ICSID Case No. ARB/20/26

Outcome: The tribunal dismissed all claims by the investor and ordered the investor to pay approximately KRW 4.9126 billion plus interest for Korea's legal and arbitration costs.

Quantum: KRW 4.9126 billion (approx. USD 3.6 million) in costs

Applicable law: China-Korea Bilateral Investment Treaty (BIT); ICSID Convention; ICSID Arbitration Rules

Issues in play: The key issue was whether the investor's investment was lawful under the host state's law, specifically whether it complied with Korean law, thereby determining if it qualified for protection under the BIT.

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